# EUR-Lex - 52013PC0382 - EN

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# 52013PC0382

**Recommendation for a COUNCIL DECISION giving notice to Belgium to take measures for the deficit reduction judged necessary in order to remedy the situation of excessive deficit /* COM/2013/0382 final */**

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Recommendation for a

COUNCIL DECISION

giving notice to Belgium to take measures
for the deficit reduction judged necessary in order to remedy the situation of
excessive deficit

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the
Treaty on the Functioning of the European Union, and in particular Article
126(9) thereof,

Having regard to the
recommendation from the European Commission,

Whereas:

(1)       According to Article 126 Treaty on the Functioning of the European Union (TFEU)
Member States shall avoid excessive government deficits.

(2)       The Stability and Growth
Pact is based on the objective of sound government finances as a means of
strengthening the conditions for price stability and for strong sustainable
growth conducive to employment creation.

(3)       On 2 December 2009, the
Council decided[1],
in accordance with Article 126(6) TFEU, that an excessive deficit existed in
Belgium and issued a recommendation to correct it by 2012 at the latest, in
accordance with Article 126(7) TFEU and Article 3 of Council Regulation (EC) No
1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the
excessive deficit procedure[2].
In order to bring the general government deficit below 3% of GDP in a credible
and sustainable manner, the Belgian authorities were recommended to (a)
implement the deficit-reducing measures in 2010 as planned in the draft budget
for 2010 and strengthen the planned fiscal effort in 2011 and 2012; (b) ensure
an average annual fiscal effort of 3⁄4% of GDP over the period 2010-2012, which
should also contribute to bringing the government gross debt ratio back on a
declining path that approaches the reference value at a satisfactory pace by
restoring an adequate level of the primary surplus; (c) specify the measures
that are necessary to achieve the correction of the excessive deficit by 2012,
cyclical conditions permitting, and to accelerate the reduction of the deficit
if economic or budgetary conditions turned out better than expected at the time
the EDP recommendations were issued; and (d) strengthen the monitoring
mechanisms to ensure that fiscal targets are respected. In its recommendations,
the Council established a deadline of 2 June 2010 for effective action to be
taken in line with the provisions of Article 3(4) of Regulation (EC) No
1467/97.

(4)       According to the
provisions of Article 126(8) TFEU, the Council decided on [21 June 2013] that
Belgium did not take effective action in response to the December 2009 Council
recommendation within the period laid down in that recommendation.

(5)       According to Article 10(3)
of Regulation (EC) No 1467/97, if actual data pursuant to Regulation (EC) No
479/2009 indicate that an excessive deficit has not been corrected by a
participating Member State within the time limits specified in a recommendation
issued under Article 126(7), the Council shall immediately take a decision
under Article 126(9), that is, give notice to the Member State to take, within
a specified time limit, measures for the deficit reduction which is judged
necessary by the Council in order to remedy the situation.

(6)       The Commission services'
2013 Spring Forecast, projects real GDP to remain flat in 2013 with domestic
demand continuing the contraction initiated in 2012. While household
consumption is likely to stagnate, investment is expected to drop, driven by an
economy-wide lack of confidence, a depressed construction sector, tightening
credit conditions and an industry featuring ample spare capacity. Both private
consumption and investment are anticipated to gain pace only as of 2014 when
domestic demand would become the main driver behind a real GDP growth rate of
1.2%. Against the background of this more robust domestic demand, import growth
is assumed to catch up with export growth. This would limit further gains from
net exports in 2014, contrary to 2013 when positive net foreign demand growth
is expected to prevent GDP from contracting.

(7)       According to the
Commission services' 2013 Spring Forecast, the general government deficit is
projected to decrease to 2.9% of GDP in 2013. The initial 2013 budget targeted
a nominal deficit of 2.15% of GDP. However, since the drafting of the budget,
the official growth projections underpinning the budget (+0.7%, in line with
the Commission services' 2012 Autumn Forecast) have been substantially revised
downwards, to 0.2% in the 2013 Stability Programme and 0.0% in the Spring
Forecast. Therefore, the government abandoned the nominal deficit target and
replaced it by a commitment to improve the structural balance by 1.0 % of GDP.
In March 2013, the government took additional measures amounting to 0.2% of GDP
on top of around 0.75% of GDP of measures taken in the initial 2013 budget,
which have been taken into account in the Commission services' 2013 Spring
Forecast. This forecast projects a structural improvement of 3⁄4 % of GDP in
2013, including a 1⁄4 pp. contribution from lower interest expenditure.

(8)       At unchanged policy, the
Commission services' 2013 Spring Forecast projects the deficit to rise again
above the reference value in 2014, to 3.1% of GDP, despite the projected growth
above potential. This new rise is due to the autonomous rising trend in social
transfers and the fact that the 2013 budget also included around 0.4% of GDP of
one-off and temporary revenues, such as a fiscal amnesty, the sale of telecom
licenses and an exceptionally high dividend from the National Bank of Belgium.

(9)       Public debt rose from 84%
of GDP in 2007 to almost 100% of GDP in 2012. The dynamics of the deficit and
of GDP account for around 6.5 pps. of the increase, while exogenous factors
amount to around 9 pps., mainly due to rescue operations in the financial
sector in the form of equity injections. According to the Commission services'
2013 Spring Forecast, it is expected to increase to over 102% of GDP in 2014.
The Belgian government intends to sell financial assets in order to keep the
debt below 100% of GDP in 2013. In this context, the Belgian government
announced recently the sale of Royal Park Investment (the special purpose
vehicle created in the context of the Fortis rescue operation) which would
reduce the debt level by 0.2% of GDP.

(10)     The European Commission
Fiscal Sustainability Report 2012 shows that Belgium does not appear to face a
risk of fiscal stress in the short term. However, fiscal sustainability risks
are high in a medium- to long-term perspective. The long-term budgetary impact
of ageing in Belgium is well above the EU average, which is mainly the result
of a rapid increase in pension expenditure as a share of GDP over the coming
decades. Although the December 2011 pension reform was an important positive
step, additional measures appear necessary to fully restore the long-term
sustainability of public finances.

(11)     Measures taken in the
initial 2013 budget and the March 2013 budget control are currently expected to
bring the deficit below 3% of GDP in 2013. However, according to the Commission
services' 2013 Spring Forecast, the safety margin against breaching the Treaty
reference value is very narrow. Moreover, the correction is currently not yet
sustainable.

(12)     Against the background of
high uncertainties regarding economic and budgetary developments, the budgetary
target recommended for the final year of the correction period should be set at
a level clearly below the reference value, in order to guarantee an effective
and lasting achievement of the correction within the requested deadline.

(13)     Therefore, a further
reduction of the 2013 deficit to 2.7% of GDP is warranted, which is consistent
with a structural improvement of 1% of GDP in 2013. To this end, additional
measures with an estimated impact of 1⁄4% of GDP are considered necessary, also
in view of possible negative second round effects.

(14)     Belgium committed in its
Stability Programme to achieve a balanced budget in structural terms in 2015,
before reaching its MTO of a surplus of 0.75% of GDP in structural terms in
2016. Subsequently, in a letter sent to the Commission on 28 May 2013, the
Belgian authorities committed to target a higher fiscal effort at 3⁄4% of GDP in
2014. Also in view of the high level of debt this is an appropriate effort and
it will comply with the debt reduction benchmark., a Thereafter, Belgium should continue making sufficient progress towards its medium-term objective including
meeting the expenditure benchmark, and towards compliance with the debt
reduction benchmark.

(15)     Furthermore, Belgium should strengthen the long-term sustainability of the pension and social security
systems. In this respect, additional efforts are needed to close the gap between
the effective and the statutory retirement age, while measures to link the
statutory retirement age to developments in life expectancy would allow
safeguarding the sustainability of the pension system in the long term.

(16)     In addition, Belgium should adopt explicit coordination arrangements to ensure that budgetary targets
are binding at federal level and sub-federal levels within a medium-term
planning perspective, including through the prompt adoption of a rule on the
general government budget balance/surplus that complies with the requirements
of the Treaty on Stability, Coordination and Governance in the Economic and
Monetary Union.

(17)     Finally, to ensure the
success of the fiscal consolidation strategy, it will also be important to back
the fiscal consolidation by comprehensive structural reforms, in line with the
Council recommendations addressed to Belgium in the context of the European
Semester and in particular those related to the Macroeconomic Imbalances
Procedure,

HAS ADOPTED THIS DECISION:

Article 1

1.           Belgium shall put an end
to the present excessive deficit situation by 2013.

2.           Belgium
shall reduce the headline deficit to 2.7% of GDP in 2013 This nominal
improvement is consistent with an improvement in the structural balance
of 1% of GDP in 2013, based on the Commission services' 2013 Spring
Forecast.

3.           Belgium shall adopt and
fully implement all the consolidation measures incorporated in the 2013 budget
as well as additional measures of structural nature to achieve the recommended
structural effort for 2013.

4.           Belgium shall stand ready to adopt further measures should risks to the budgetary
plans materialise. Budgetary consolidation measures
should secure a lasting improvement in the general government structural
balance in a growth-friendly manner.

Article 2

1.           Belgium shall submit to
the Commission, by 21 September 2013 at the latest, a report outlining the
measures taken to comply with this Decision. The Commission will evaluate this
report with a view to assessing progress made towards the correction of the
excessive deficit.

2.           Belgium shall submit
further quarterly reports to the Commission, examining progress made in
complying with this decision.

3.           Belgium shall submit a
report by 31 December 2013 on the intended implementation of the first recommendation
issued under the European Semester regarding the adoption of explicit
coordination arrangements to ensure that budgetary targets are binding at
federal level and sub-federal levels within a medium-term planning perspective.

4.           Belgium shall present
structural measures for 2014 which ensure a sustainable correction of the
excessive deficit and appropriate progress towards its medium-term objective.

Article 3

This
Decision is addressed to the Kingdom of Belgium.

Done at Brussels,

For
the Council

The
President

[1]               All documents related to the
excessive deficit procedure of Belgium can be found at:          
http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/countries/belgium_en.htm

[2]               OJ L 209, 2.8.1997, p. 6.